REQUISITOS MÍNIMOS DE LAS LUMINARIAS

Manuel G. Bertomeu

ABSTRACT

In many countries of South and Southeast Asia trees planted on farms are becoming the most important source of wood. In the Philippines, increasingly larger volumes of the timber traded and consumed come from trees grown on small farms in the sloping uplands. For more than a decade, small-scale farmers in Northern Mindanao have been generating a significant marketable surplus of fast-growing timber trees, and viable farm forestry industries have emerged in the region as a result. However, the Philippine government has not duly acknowledged yet, the importance of timber production by smallholder farmers and their contribution to sustain the wood industry. Existing policy disincentives constrain the establishment of tree farms and commercialization of farm- grown timber. This paper has two objectives. First, to describe how timber produced by farmers is reaching the market, the structure of this market and the end uses of farm- grown timber in the province of Misamis Oriental, Northern Mindanao. Second, to estimate the importance of timber production by smallholders and explore its potential to sustain the wood industry. The study was conducted among wood processing plants located in Cagayan de Oro City and its neighboring municipalities. Although in the past years the forestry sector output has been declining due to depletion of forest resources, the forest- and wood-based industry is the second most important industry sector in the region. Nowadays, there are in Northern Mindanao 135 small-scale sawmills exclusively supplied with farm-grown timber. These have an estimated log utilization potential of 111,064 m3 yr-1 and a sawn timber production potential of 76,596 m³ yr-1. Planted trees also represent a large percentage of the national and international production and trade of tropical timber in the country. Forestry statistics indicate that in 1999 up to 70 percent (500,000 m³) of the country log production came from planted trees. This study provides evidence that most probably a large share of this timber is produced on-farm. This demonstrates that smallholder farmers can produce large quantities of timber and efficiently supply local and national markets. The Philippine government and the wood industry sector should recognize the role of smallholder farmers as land managers and efficient producers of many important agricultural commodities, including timber. INTRODUCTION

Since 1950, the forest area in the Philippines has declined at a rate of 2.2 percent annually. By 1987 only 6.6 million hectares of the country (i.e. 22 percent of the total land area) remained forested (Kummer 1992). Rapid deforestation has had dramatic economic and environmental consequences. It is estimated that 5.1 million hectares (i.e. 17 percent of the country’s land area) are grasslands dominated by Imperata cylindrica

(Garrity et al. 1997). The forestry sector’s contribution to the Gross Domestic Product

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has dropped from 12.5 percent in 1970 to just 2.3 percent in 1988 (PCARRD 1994), and 1.3 percent in 1990 (ADB 1994). The Philippines is now a net importer of timber (ITTO 1996). Timber imports are draining the country’s foreign currency reserves at a rate of PhP. 14 billion per year (Orejas 2002).

For more than three decades, tree planting has been promoted as the solution to the negative effects of widespread forest destruction. However, reforestation efforts have had limited success. Timber License Agreement (TLA) holders, who were required to reforest an area of denuded land equivalent to that selectively logged and to engage in industrial tree plantation, did not significantly contribute to the reforestation efforts due to corruption (Vitug 1993). Large government- and donor-funded reforestation and industrial plantation programs over large tracts of land created social conflicts due to farmer evictions and imposed restriction on farmers’ livelihood activities on land they traditionally managed (Carandang and Lasco 1998; Lasco et al. 2001; Nimmo-Bell & Company Ltd. 2001). In addition, the wood industries associated with industrial forest plantations have struggled for economic survival (Philippine Daily Inquirer 2000). As with other tree crops, such as coffee, cacao and rubber, scale economies may not exist in the production of timber since neither large-scale machinery nor central management is required for the production of these tree crops (Hayami et al. 1993; Barr 2002). Social forestry programs and initiatives that started in the early 1970s have not been more successful. According to Pasicolan (1996) between 1988 and 1992 the Contract Reforestation Program successfully reforested only 10 percent of its 225,000 ha target. The program was very expensive to implement, and its assumptions that the mere participation of rural communities in planning and implementation of time-framed, target-oriented programs would be sufficient for success proved too simplistic.

In contrast, as a result of favorable market conditions and the promotion of a tree planting culture among upland farmers during the past two decades, smallholder tree farming has emerged as a profitable farm enterprise and as a viable alternative to industrial forest plantations and costly government-driven reforestation (Garrity and Mercado 1994; Pasicolan et al. 1997). Paradoxically, small-scale tree farms in the Philippines were first promoted in the early 1970s under the smallholder tree farming contract scheme of the Paper Industries Corporation of the Philippines (PICOP), one of the first major industrial forest plantation initiatives established to supply a pulp and paper mill at Bislig, Surigao del Sur. From 1972 up to 1994, PICOP established in its forest concession area 33,200 ha of Paraserianthes falcataria and Eucalyptus deglupta

(ADB 1994; Jurvélius 1997).

Tree farms developed under this scheme quickly spread. In 1997, there were 15,000 ha of tree farms located nearby the PICOP mill site and another 29,000 ha further away but selling wood to PICOP (Jurvélius 1997). The high price of timber and the demonstration effect of the PICOP tree farming scheme, as well as the development of other successful tree planting programs, supported the spread of tree farming throughout the country.

Unfortunately, tree farming has been promoted on the promise of huge economic returns, based on overoptimistic yields of fast-growing trees in favorable tropical humid conditions and unrepresentatively high timber prices at specific times and locations. The slogan Kahoy karon, bulawan ugma (trees today, gold tomorrow) popular among Filippinos in Northern Mindanao exemplifies the expectations put on tree farming. A

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local newspaper reported that one hectare of Eucalyptus deglupta could yield PhP. 14,000 per tree or PhP. 10.5 million per ha (Fonollera 1996). In the past few years, lower than expected returns from tree farming, particularly with Gmelina arborea (hereafter referred to as gmelina) and Paraserianthes falcataria (hereafter referred to as falcata), has caused disenchantment among upland farmers (Caluza 2002). As planted trees reached harvestable age, prices fell drastically due to market saturation. In 1997, the price of gmelina on stumpage averaged PhP. 4 per board foot (bdft.), (i.e. 33 US$ m3_{), a 60} percent decline with respect to prices in the early 1990s. Moreover in the smallholder context, timber yields may be lower than predicted as a result of adverse soil conditions and farmers’ poor management practices (e.g. excessive pruning and lack of thinning).

In spite of these setbacks, a field survey conducted in the upland municipality of Claveria, Northern Mindanao, among 112 farmers revealed that 55 percent wanted to plant more trees and were interested in trying new timber species (Bertomeu 2004). In addition to the benefits provided to rural families, including fuel wood, construction materials, protection against erosion, shade and shelter, farm-grown trees are taking an increasing share of the timber industry and trade in the Philippines. The existence in Region 10 of 135 small-scale sawmills exclusively supplied with farm-grown timber (DENR 1996b) demonstrates the extent and importance of tree farming in the region and provides evidence that growing timber trees on farms is still considered a viable livelihood alternative and an activity with an importance to the wood industry sector.

In many countries and regions of South and Southeast Asia trees planted on farms are becoming the most important, if not the only, source of timber. In Punjab, India, farm trees account for 86 percent of the province’s growing stock. In Sri Lanka, trees outside the forest represents over 70 percent of industrial wood. And in Pakistan, trees on farms account for 23 percent of all timber growing stock. Even in Indonesia, a country that still has vast forest resources, some 20 percent of the total wood consumed is derived from trees outside the forest (FAO 1998). In the Philippines, increasingly larger volumes of timber consumed come from planted trees as well. Most of these are grown on small farms in the sloping uplands. This paper describes how the marketable surplus of timber produced by farmers is reaching the market, the structure of this market and the end uses of farm-grown timber in the province of Misamis Oriental in Northern Mindanao. Then, it shows the importance of farm-grown trees to sustain the regional wood industry and outlines timber producers’ concerns about the future of the industry. By providing evidence of the contribution of farm-grown trees to the wood industry, I aim to highlight that timber generated on small farms, far from being anecdotal, has the potential to be a viable and reliable supply for the wood industry.

MATERIALS AND METHODS

The study was conducted among smallholder farmers in Claveria, Misamis Oriental, and wood processing plants located in Cagayan de Oro City and its neighboring municipalities. Cagayan de Oro is the capital city of Misamis Oriental, one of the four provinces of Region 10 in Northern Mindanao. Region 10 of Northern and central Mindanao is composed of the provinces of Misamis Oriental, Misamis Occidental, Bukidnon and Camiguin. Although the forestry sector output in the region has been declining in recent years due to depletion of the resource and the reduction in legal TLA

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(Louis Berger International 1999), the forest- and wood-based industry is the second most important industry sector after processed foods and beverages (Provincial Capitol 1997). According to the Cagayan de Oro-Iligan corridor master plan, in 1998 the agriculture, fishery and forestry sector was an important contributor to the corridor’s economy, accounting for a combined share of PhP. 3.3 billion or 18 percent of the gross service area product of the two provinces of Misamis Oriental and Misamis Occidental. Consequently, the establishment of industrial crops, such as forest trees, rattan and rubber, is one of the economic sectors proposed for development (Louis Berger International 1999). The Department of Environment and Natural Resources (DENR) reported that in 1996 there were in Region 10 six sawmills, five re-sawmills, three veneer and plywood plants and 135 mini-sawmills. Wood sources to these industries are TLAs from eastern and southern Mindanao, planted trees from Region 10 and adjacent regions, and imported timber from USA, Malaysia, UK and Singapore (DENR 1996b).

In the year 2000, seventeen farmers who harvested trees, sixteen owners of mini- sawmills and three managers of large-scale wood industries of Misamis Oriental were interviewed. The survey technique consisted of structured and semi-structured questionnaires with major topics of discussion concerning timber supply and demand, processing and production, uses of farm-grown timber, marketing system, constraints to the industry and trends, and future expectations. Important information was also gathered during several study tours to wood processing plants and training and research activities conducted in collaboration with tree farmers and a plywood company at Tagoloan, Misamis Oriental. These activities were part of the Landcare agroforestry extension project funded by the Spanish Agency for International Cooperation (AECI) and implemented by the World Agroforestry Center (ICRAF). Additional data on timber trade and marketing have been collected from published reports, secondary sources, the National Statistics Office (NSO) and local agricultural statistics.

Limitations of the study

I used the best statistics on timber production available from several sources, including local governments, national agencies and international organizations. However, because of the lack of transparency, so common in the forestry sector, and/or the absence of proper market information systems, there are probably large discrepancies between the actual amount on timber produced, traded and consumed and those reflected in the statistics. For example, there are no estimates of the large volumes of timber locally consumed in raw form (i.e. as poles, posts, or lumber), or processed (e.g. furniture, wooden crafts etc.). Also, although small-scale wood processors know well the production capacity of mini-sawmills, including recovery rates, most of them did not keep records of total production or were reluctant to share this information. It should be noted as well that given the species and the size and quality of the logs produced, farm- grown timber cannot be a substitute for wood originating from large diameter and quality logs coming from natural forests. Therefore, comparisons between farm-grown timber and other timber produced, traded or consumed should be interpreted with caution.

191 RESULTS

Supply, demand and uses of farm-grown timber

From the late 1980s and throughout the 1990s an increasing number of small-scale sawmills were established in Misamis Oriental for the processing and commercialization of farm-grown timber stocks. According to the DENR, in 1996 there were 135 small- scale sawmills in Region 10 of Northern Mindanao (DENR, 1996b). All the small-scale sawmills are mainly supplied with logs of gmelina and falcata. Other species milled, though in much smaller volumes, include Acacia mangium (mangium), Swietenia

macrophylla (mahogany), Eucalyptus deglupta (bagras), and Spathodea campanulata

(African tulip). Wood processors indicated that trees are mostly grown by smallholder farmers, although sometimes falcata originates from the large-scale forest plantations of eastern Mindanao. The average farm area managed (farm area managed = farm area owned + farm area rented) by those farmers interviewed was 5.7 ha, the average number of trees planted was 995 trees (SD=1,351) and the number of trees harvested was 232 (SD=519). Although studies conducted in Claveria show that small farm size do not prevent timber tree planting (Bertomeu 2004), results of this survey indicate that smallholders with larger farms (i.e. above the average size in Claveria of 2.5 to 3 ha), are more likely to be those market-oriented timber producers.

All farmers interviewed sold their trees on stumpage (i.e. standing on the stump). Fifty percent of the small-scale sawmills owners interviewed look themselves for plantations, buy the standing trees stumpage value, and haul the logs to the sawmill. For the other 50 percent, trees are harvested and delivered to the sawmill by farmers or middlemen. Gmelina is mostly purchased from municipalities within the province of Misamis Oriental, whereas falcata is bought in truckloads coming from localities of the neighboring provinces of Agusan and Surigao, as far as 200 km. This shows that farm forestry is a viable option for smallholder farmers even in remote areas.

About 50 percent of the small-scale sawmills owners experience slight fluctuations in the supply and demand of farm-grown timber throughout the year. They reported that there is more supply of timber from smallholder plantations during the dry season (i.e. from February to June), as this is the agricultural slack period and farmers need income for household consumption and to pay school fees. Moreover, during the dry season farms are more accessible and hauling and transport of heavy logs easier. The rest of the year, farmers are busy planting and harvesting field crops and therefore, it is more difficult to find trees for sale. By contrast, demand is lower during the first semester of the year and higher in the second as consumers have more cash to spend towards the end of the year due to extra payments and the harvest of agricultural crops. In spite of this, all but two interviewees responded that fluctuations in log supply and timber demand are not as marked so as to cause fluctuations in the price of timber.

Figure 1 depicts the most important transformations and end uses of farm-grown timber in Misamis Oriental. The great bulk of logs produced by farmers are sawn in small-scale sawmills and either sold for further processing to medium- and large-size wood industries, or sold to retailers (lumber yards, carpentries, furniture shops) and individuals. Wood industries use falcata planks and veneer as core stock in the production of ply board (also called block board) and plywood. Gmelina is mostly used for furniture,

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house construction (window jams, doors, floor- and wall-tiles) and wooden crafts. Low quality wood and small size pieces are used for pallets, crates and wooden boxes. Due to the smaller size and lower quality, farm grown timber cannot be a substitute for timber originating from natural forests. However, according to the respondents, several premium timber species planted on farms, such as mahogany, have the potential to capture the market niche currently under the premium commercial timbers (veneer and large size, quality wooden planks). Unfortunately, although widely cultivated throughout the Philippines, mahogany stocks growing on farms in Northern Mindanao are not sufficiently large yet so as to supply the wood industries with sufficient quantities of timber.

Figure 1: Production and marketing system of farm-grown timber in Misamis Oriental, Philippines: producers’ decisions, product transformation and end use

TREE PLANTATION

weeding; pruning; thinning; harvesting

POLES LOGS STUMPAGE

weeding; pruning; thinning; harvesting sale Chainsaw milling LOGS Harvesting LOCAL MARKET LUMBER Sale Processing (mini-sawmill) Sale LUMBER Processing Sale HOUSEHOLD Household consumption Sale PALLETS CRATES CONSTRUCTION MATERIALS FURNITURE CRAFTS

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In the early 1990s, the price of farm-grown gmelina on stumpage was high, varying between PhP. 7 to 9 bdft-1. But since 1997, the average price is only PhP. 4 bdft- 1. Tree planters have a good understanding of the reasons for the current decline in the price of farm-grown timber. Farmers reported that the market is likely to be saturated as plantation stocks rapidly increased when prices were high. In addition, lower demand and low timber quality are also contributing factors. Although some farmers indicated market control by exploitative middlemen as the reason for the current low timber price, there is no substantive evidence of the presence of a timber cartel since good market access and the existence of many buyers make the trade of farm-grown timber fairly competitive. Other factors influencing the price of farm-grown timber are the size and quality of the log, which ultimately determine the end use. According to the owners of small-scale sawmills interviewed, the price has declined because of the existence of large stocks of undersized and low quality timber. Small-scale sawmills require logs with a minimum length of 4 ft (although 3 ft can be accepted but at an even lower price) and 12 cm small- end diameter. However, 37 percent of the respondents reported that they are willing to pay farmers a stumpage price one to two PhP. per bdft-1 higher for straight logs with 16 to 18 cm small-end diameter and 8 ft long. Timber planks of this size are used for furniture and house construction. Sawn timber, used for furniture and house construction, is graded into three categories: A (planks 8 ft long without knots), B (6 ft long with some knots), and C (4 ft long, knotty). Prices vary accordingly: 11 or 12 PhP. for category A; 9 or 10 PhP. for category B; and 7 or 8 PhP. for category C. For veneer, timber price also depends on log size. In the year 2002, prices ranged from 3 PhP. per bdft-1 for logs 26 to 28 cm in diameter, to 6 PhP. per bdft-1 for logs with diameter 60 cm and larger. There is